Correlation Between IShares Edge and Betashares Asia

Can any of the company-specific risk be diversified away by investing in both IShares Edge and Betashares Asia at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares Edge and Betashares Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Edge MSCI and Betashares Asia Technology, you can compare the effects of market volatilities on IShares Edge and Betashares Asia and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares Edge with a short position of Betashares Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Edge and Betashares Asia.

Diversification Opportunities for IShares Edge and Betashares Asia

-0.03

Correlation Coefficient

IShares Edge  Betashares Asia

Good diversification

The 3 months correlation between IShares and Betashares is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding iShares Edge MSCI and Betashares Asia Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Betashares Asia Tech and IShares Edge is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares Edge MSCI are associated (or correlated) with Betashares Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Betashares Asia Tech has no effect on the direction of IShares Edge i.e., IShares Edge and Betashares Asia go up and down completely randomly.

Pair Corralation between IShares Edge and Betashares Asia

Assuming the 90 days trading horizon IShares Edge is expected to generate 2.27 times less return on investment than Betashares Asia. But when comparing it to its historical volatility, iShares Edge MSCI is 1.93 times less risky than Betashares Asia. It trades about 0.09 of its potential returns per unit of risk. Betashares Asia Technology is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  727.00  in Betashares Asia Technology on October 7, 2024 and sell it today you would earn a total of  285.00  from holding Betashares Asia Technology or generate 39.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

iShares Edge MSCI  vs.  Betashares Asia Technology

iShares Edge MSCI

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Edge MSCI are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Edge is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Betashares Asia Tech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Betashares Asia Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Betashares Asia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Edge and Betashares Asia

The main advantage of trading using opposite IShares Edge and Betashares Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Edge position performs unexpectedly, Betashares Asia can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Betashares Asia will offset losses from the drop in Betashares Asia's long position.

The idea behind iShares Edge MSCI and Betashares Asia Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.